Equities report: Hesitant Equity Bulls

Over the past week there seems to be some hesitation on behalf of US stock market bulls to advance higher.  In this report, we are to discuss fundamentals that could be affecting US stockmarkets while also revisit Microsoft (#MSFT) and take a look at General Motor’s (#GM) intentions and finally conclude with a technical analysis of the S&P 500.

The Fed’s intentions

With the earnings season drawing to a close, a key issue on a fundamental level for the direction of US stockmarkets, could be the Fed’s intentions. The market expectations currently are for the bank to have reached its terminal rate and proceed with a rate cut in the May meeting. The data provided by Fed Fund Futures tend to highlight a shift in the market’s stance, which a week earlier expected a rate cut in the bank’s June meeting. Comments made by Fed policymakers may have aided to that end. Characteristically Fed Board Governor Waller despite stating that inflation is still too high, noted that the US economy is moving in the right direction and tended to display confidence that the current level of interest rates is able to bring inflation back to the Fed’s 2% target. Should we see the market sentiment solidifying towards the possibility of an earlier rate cut, we may see US stock markets rising further. It should be noted that a possible slowdown of the Core PCE price index for October, due out tomorrow, the Fed’s favorite inflation measure could enhance such expectations.

Black Friday-Cyber Monday

Furthermore we note that Black Friday and Cyber Monday retail sales seemed to be particularly successful and thus providing the market a good kick-start of the holiday shopping season, adding more optimism in the market sentiment. The main beneficiary seems to be the electronics sector, yet we have two worries over the issue. Given the inflationary pressures, and that the main beneficiary seems to be the electronics sector, our worry is that the relatively good retail sales were more a result of increased price rather than volume, implying a depression in other sectors. The second issue would be whether consumers’ wallets are compressed by high prices and are hunting more for a bargain, a scenario that may imply that the average US consumer may not be so willing to spend more in the holiday season.         

Microsoft’s skyrocketing

The recent turmoil in OpenAI, with the removal and rehiring of Sam Altman as CEO, had a positive side-effect on Microsoft (#MSFT). It was characteristic how media characterized the move made by Microsoft to hire Altmann as a tactical success. Overall, Microsoft’s (#MSFT) behavior, tended to highlight the soundness of Satya Nadella’s (Microsoft CEO) leadership skills. The issue tended to create confidence on behalf of investors to the technological giant, fueling the rise of its share price even further, reaching an unprecedented level of almost $385. Given the company’s strong AI orientation, its computing capabilities and its current cloud business segment, we tend to see the possibility for the share’s price to remain supported on a fundamental level. Yet at this point, we would note that competition is fierce in the sector, and the race for ultra-efficient chips is ongoing. It’s characteristic how Amazon (#AMZN), a chief rival in the cloud business announced a new cloud AI chip that could shift the market’s attention away from Microsoft (#MSFT).      

General Motors’ buyback scheme

We also note the rise of General Motors’ (#GM) share price in the past few days. The company has announced a 33% increase in its dividend for 2024 and also outlined plans for a $10 billion accelerated share buyback program, according to investing.com. The company’s moves seem to show a breath of increased confidence which in turn may continue supporting its share price at a fundamental level in the short term. The announcement tends to gain on importance after the UAW strikes earlier this year and tends to signal that the company may be out of the swamp.        

기술적 분석

US 500 Cash Daily Chart

Support: 4540 (S1), 4465 (S2), 4400 (S3)

Resistance: 4610 (R1), 4720 (R2), 4820 (R3)

US 500 bulls seemed to remain rather indecisive in the past few days, with the price action remaining above the 4540 (S1) support line. The index’s price action was able to breach the upward trendline guiding it, signaling an interruption of the upward movement, which should force us to switch our bullish outlook in favour of a sideways movement. Yet there is still a relative bullishness in the market sentiment given that the RSI indicator is running along the reading of 70. On the other hand, the indicator’s reading may be trying to signal that the index has reached overbought levels and may be ripe for a correction lower.  Furthermore, we note that there is considerable distance between the price action and the upper Bollinger band, implying that there is some additional room for the bulls to play there. Yet the Bollinger bands seem to have started to narrow, implying that volatility is easing.  Should the bulls regain control over the index, we may see the price action breaching the 4610 (R1) resistance line, which was tested in the last days of July and take aim of the 4720 (R2) resistance nest. Higher than that we also note the 4820 (R3) resistance hurdle. For a bearish outlook we would require the index to breach the 4540 (S1) support line which kept the index’s price action afloat in the past few days and aim for the 4465 (S2) support base. For a more extreme bearish scenario we note the 4400 (S3) support barrier.

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